Heterogeneous expectations, indeterminacy, and postwar US business cycles

Francisco Ilabaca and Fabio Milani

Journal of Macroeconomics, 2021, vol. 68, issue C

Abstract: This paper estimates a New Keynesian model extended to include heterogeneous expectations: consumers and firms form either rational or boundedly-rational expectations. The inclusion of heterogeneous expectations alters the determinacy properties of the model, with the details of expectations potentially becoming more influential than the Taylor principle for equilibrium stability.

Keywords: Heterogeneous expectations in New Keynesian model; Indeterminacy; Sunspots; Taylor principle; Deviations from rational expectations; Time-varying parameters (search for similar items in EconPapers)
JEL-codes: E32 E52 E58 E70 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Related works:
Working Paper: Heterogeneous Expectations, Indeterminacy, and Postwar US Business Cycles (2020)
Working Paper: Heterogeneous Expectations, Indeterminacy, and Postwar US Business Cycles (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jmacro:v:68:y:2021:i:c:s0164070421000197

DOI: 10.1016/j.jmacro.2021.103307

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